Barchart Morning Call
Overnight Developments
Global Financial Calendar
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- Global stocks are higher with the European Euro Stoxx 50 up +0.20% and June S&Ps up +6.50 points. The dollar index slipped to a 1-month low and most commodities are higher on optimism over the European debt crisis. The euro climbed to a 1-month high against the dollar after ECB President Trichet said a rollover of Greek debt as an alternative means of easing Greece's funding squeeze "is not a default, and is something the ECB would consider appropriate." The ECB has been opposed to any measure that could be classified as a default to avoid what EU Economic and Monetary Affairs Commissioner Rehn said would be a "Lehman Brothers catastrophe." European stocks were also boosted by better-than-expected economic data as Apr Euro-Zone retail sales rose +0.9% m/m and +1.1% y/y, stronger than expectations of +0.3% m/m and unchanged y/y, while Apr German factory orders advanced +2.8% m/m and +10.5% y/y, stronger than expectations of +2.0% m/m and +9.1% y/y. Crude oil prices slipped in overnight trade after a Gulf delegate said OPEC will raise its oil output target tomorrow. Speculation has been building that Saudi Arabia is seeking an agreement to boost production by as much as 1.5 million barrels a day.
- The Asian stock markets today closed mixed with Japan up +0.67%, Hong Kong -0.35%, China +0.60%, Taiwan +0.12%, Australia -0.06%, Singapore +0.07%, South Korea -0.67%, India +0.41%. The yen fell back from a 1-month high against the dollar and lifted Japanese exporters after Japan's Finance Minister Noda said "I will closely monitor developments in the markets." Chinese stocks closed higher despite the report from the Economic Information Daily that said the PBOC may raise interest rates by 25 bp this weekend and may increase banks' reserve requirement ratios by 50 bp next week after inflation and other economic indicators are released. The RBA left its benchmark interest rate unchanged for a sixth straight meeting and signaled little urgency to increase borrowing costs as a stronger currency helps contain inflation. RBA Governor Stevens held Australia's overnight cash rate at 4.75% and said "inflation will be close to target over the next 12 months."
- June S&Ps this morning are trading up +6.50 points. The US stock market yesterday settled modestly lower on weakness in bank stocks along with growing concern that economic growth continues to slow: Dow Jones -0.50%, S&P 500 -1.08%, Nasdaq Composite -1.11%. The Dow and S&P 500 fell to 2-1/4 month lows while the Nasdaq posted a 1-1/2 month low. Bearish factors for stocks included (1) weakness in bank stocks led by Wells Fargo which declined after well-known bank analyst Bove cut his recommendation on the bank to "sell" from "neutral," citing a poor economic environment. weak housing prices, slowing manufacturing indicators and a negative regulatory environment, and (2) interest rate concerns after Philadelphia Fed President Plosser said an exit from stimulus measures should start "long before" a recovery in the US jobs market is assured.
- Bullish factors included (1) speculation that fund managers may begin to scoop up cheaply priced US stocks on valuation after the S&P 500 fell to 12.4 times its companies' estimated operating earnings, its cheapest valuation in 9 months, and (2) strength in mining stocks and metal producers as the price of gold rallied to a 1-month high and after Goldman Sachs reiterated its "buy" recommendation on Freeport-McMoRan Copper & Gold.
- International Paper (IP) climbed 2.7% in pre-market trading after the world's largest pulp-and-paper maker made a $3.31 billion hostile takeover bid for rival Temple-Inland Inc.
- September 10-year T-notes this morning are down -5 ticks. T-note prices yesterday closed mixed as an increase in safe-haven demand offset supply concerns and hawkish comments from Philadelphia Fed President Plosser: TYU11 +0.5, FVU11 +2.0, EDZ11 unchanged. Bullish factors included (1) the Fed's action to purchase $6.397 billion of Treasuries as part of its QE2 asset purchase program, and (2) increased safe-haven demand for Treasuries after the S&P 500 slumped to a 2-1/4 month low. Bearish factors included (1) comments from Philadelphia Fed President Plosser who said an exit from stimulus measures should start "long before" a recovery in the US jobs market is assured, and (2) supply pressures ahead of the Treasury's $32 billion auction of 3-year T-notes on Tue.
- The dollar index this morning is weaker and at a 1-month low with the dollar/yen +0.10 yen and the euro/dollar +0.88 cents at a 1-month high. The dollar index yesterday sank to a 1-month low on speculation the Fed will lag behind other central banks in raising interest rates but recovered its losses and closed higher after the euro weakened on increased European sovereign-debt concerns: Dollar Index +0.169, USDJPY -0.174, EURUSD -0.00586. Bullish factors included (1) the larger-than-expected decrease in Jun Euro-Zone Sentix investor confidence which fell to an 11-month low and is euro negative, and (2) increased safe-haven demand for the dollar on concern a Greek default would devastate European banks after data from the BIS showed that at the end of 2010, Greek government bonds held by banks in countries reporting to the BIS totaled $54.2 billion, of which 96% was owned by European lenders. Bearish factors included (1) speculation the Fed will lag behind other global central banks in raising interest rates, which will further weaken the dollar's interest rate differentials, and (2) strength in the yen which rose to a 1-month high against the dollar on increased safe-haven demand as global equity markets fell on concern over the sustainability of the economic recovery.
- July crude oil prices this morning are trading down -36 cents a barrel and July gasoline -0.23 of a cent per gallon. Crude prices were undercut in overnight trade after an OPEC delegate said the cartel will raise production quotas. Crude oil and gasoline prices yesterday weakened and closed lower on speculation the global economic recovery and fuel demand are starting to falter: CLN11 -$1.21, RBN11 -4.32. Bearish factors included (1) the larger-than-expected drop in Jun Euro-Zone Sentix investor confidence to an 11-month low, which may portend a slowdown in European economic growth and energy demand, and (2) overall commodity weakness on concern s global economic slowdown will lead to reduced demand for commodities, including crude. Bullish factors included (1) the early drop in the dollar index to a 1-month low, which boosted investment demand in commodities, and (2) the statement from Venezuela?s Oil Minister who said OPEC is unlikely to raise output quotas at this week's cartel meeting and that "We believe at the moment we're in balance."
Global Financial Calendar
| Tuesday 6/7/11 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int?l Council of Shopping Centers) weekly retailer sales. |
| 0855 ET | Redbook weekly retailer sales. |
| 1000 ET | Jun IBD/TIPP economic optimism expected -0.8 to 42.0, May +2.0 to 42.8. |
| 1130 ET | Weekly 4-week T-bill auction. |
| 1230 ET | Atlanta Fed President Dennis Lockhart speaks on the economic outlook to the Charlotte Economics Club. |
| 1300 ET | Treasury auctions $32 billion 3-year T-notes. |
| 1500 ET | Apr consumer credit expected +$5.000 billion, Mar +$6.016 billion. |
| 1545 ET | Fed Chairman Ben Bernanke speaks at the International Monetary Conference in Atlanta, GA. |
| 2100 ET | New York Fed President William Dudley speaks at the Foreign Policy Association Corporate Dinner in NY. |
| Japan | |
| 0100 ET | Apr Japan coincident index CI expected 103.7, Mar 103.5. Apr leading index CI expected 96.5, Mar 100.1. |
| 1950 ET | Apr Japan current account balance expected -83.5% y/y, Mar -34.3% y/y. |
| Euro-Zone | |
| 0500 ET | Apr Euro-Zone retail sales expected +0.3% m/m and unchanged y/y, Mar -0.9% m/m and -1.7% y/y. |
| Germany | |
| 0600 ET | Apr German factory orders expected +2.0%^ m/m and +9.1% y/y, Mar -4.0% m/m and +9.7% y/y. |
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